Four factors will determine Malaysia’s economic outlook..by OCBC

Friday October 12, 2012

By NG BEI SHAN
beishan@thestar.com.my

KUALA LUMPUR: Oil and crude palm oil (CPO) prices, exports and the political landscape will determine Malaysia’s economic outlook, said OCBC Bank (M) Bhd. Its director and chief executive officer Jeffrey Chew Sun Teong said the country’s healthy gross domestic product (GDP) would be affected by these four factors on the backdrop of the impending global downturn.
The International Monetary Fund in its report had recently downgraded global growth to 3.3% from 3.5% for this year and 3.5% from 3.9% in 2013.

Chew expected Malaysia’s GDP, which grew 5.1% in the first half, to remain strong in the second half. “The projects under the Economic Transformation Programme (ETP) will help to boost domestic growth,” he told reporters after delivering his keynote address at the ACCA Malaysia Annual Conference 2012. At the same time, he noted these projects were funded by the Government’s revenue which was dependent on oil and commodities prices. “Oil is the core revenue for the country while CPO has also been quite profitable for the plantation sector.”

According to the Economic Report 2012/2013, receipts from petroleum income tax were expected to decline by 4.6% to RM30.5bil due to moderating crude oil prices while dividend income from Petrolian Nasional Bhd was expected to be RM27bil. Data from Bloomberg shows that the average CPO price was RM2,232 in 2009, RM2,714 in 2010, RM3,244 in 2011 and RM3,109 year-to-date. The volatility of CPO prices was due to growing stockpiles and lacklustre demand. Chew said he was more concerned now compared with the situation in 2009, 2010 and 2011 as the local economic growth was sustained by the high oil and CPO prices then, adding that low oil prices that continued for more than six quarters would be a negative indicator.

“We have seen slowing demand for Malaysian products, especially from China, India, Brazil and European countries,” he added. Statistics from The Malaysia External Trade Development Corp show that exports from January to August 2012 increased marginally by 1.53% to RM465bil compared with the previous corresponding period.

He said the worst-case scenario would be the four factors showing negative signs concurrently. However, he commended the Government for an innovative budget where “everybody gets a piece of it”. “In reality, the cake is only so big so it has to be balanced,” he said. He hoped the general election would be held quickly so that ETP projects could be carried out smoothly thus, boosting the economy.

Source: The Star

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